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CBPCustoms BrokerImport

BEWARE – Liquidated Damages WILL be Imposed for 10+2 Violations

posted by Jennifer Diaz July 18, 2013 0 comments

For those who thought CBP’s “measured and commonsense” approach for those that weren’t fully complying with the Importer Security Filing (ISF or 10+2) rules would last forever, think again!

Effective, July 9, 2013, CBP advised it would start the liquidated damages phase of the Importer Security Filing (ISF) enforcement process. CBP will now make use of the newly activated cargo holds in the Automated Cargo Environment (ACE) system to address non-compliance with the ISF rule. CBP may also withhold the release or transfer of non-compliant ISF shipments at the terminal until the required ISF is filed. For carrier violations of the vessel stow plan requirement, CBP may refuse to grant a permit to unlade the merchandise. Once the ISF data is received and a security assessment is made, additional enforcement actions including a Non-Intrusive Inspection (NII) and/or intrusive exams may be initiated.

Liquidated Damages

CBP may also assess liquidated damages of up to $5,000 per violation for the submission of an inaccurate, incomplete or untimely filing. CBP Dec. 09-26 discusses “Guidelines for the Assessment and Cancellation of Claims for Liquidated Damages for Failure to Comply with the Vessel Stow Plan, Container Status Message, and Importer Security Filing Requirements.”  First violations may be mitigated to $1,000-$2,000 – depending on the presence of aggravating or mitigating factors.  Some mitigating factors for the failure to file a complete, accurate and timely ISF include evidence of progress in the implementation of ISF during the “flexible enforcement period,” small number of violations compared to number of shipments, Tier 2 and 3 C-TPAT status, remedial action….  CBP has advised that “no relief will be granted if CBP determines that law enforcement goals were compromised by the violation.”  Aggravating factors include multiple errors on your ISF!  If you do receive a Liquidated Damages claim, it is important you consult with an expert to file a timely, persuasive Petition to CBP and address all relevant mitigating factors to assure you receive the maximum reduction possible.

What’s ISF Again?

The ISF rules require importers and vessel-operating carriers to provide additional advance trade data on cargo shipments to CBP 24 hours prior to vessel lading, pursuant to Section 203 of the Security and Accountability for Every Port (SAFE Port Act) of 2006.

Importers must report the following 10 data elements on each ISF:

  1. Manufacturer (or supplier) name and address
  2. Seller (or owner) name and address
  3. Buyer (or owner) name and address
  4. Ship-to name and address
  5. Container stuffing location
  6. Consolidator (stuffer) name and address
  7. Importer of record number/foreign trade zone applicant identification number
  8. Consignee number(s)
  9. Country of origin
  10. Commodity Harmonized Tariff Schedule (HTS) number

From the carrier, 2 data elements are required:

  1. Vessel stow plan – required for arriving vessels with containers.
  2. Container status messages – required for containers arriving via vessel.

Hence, 10+2!

For shipments consisting entirely of freight remaining on board (FROB) cargo or goods intended to be transported in-bond as an immediate entry or transportation and exportation entry, the following 5 data elements are required:

  1. Booking party name and address
  2. Ship-to name and address
  3. Commodity Harmonized Tariff Schedule (HTS) number
  4. Foreign Port of Unlading
  5. Place of delivery

In order to avoid liquidated damages and untimely delays with your cargo, full ISF compliance is now required.  Since we’re talking compliance, do you have your pre-compliance plan established?  If not… Let’s talk!

If you have any questions on the listed requirements, need assistance with cargo detained as a result of this new enforcement phase, getting your C-TPAT application in ASAP (and getting to Tier 2 quickly!), or any other compliance or enforcement question, please feel free to contact Diaz Trade Law at info@diaztradelaw.com and we would be happy to assist you!

Best PracticesCosmeticsFDA IssuesFoodFSMAImportImport AlertMedical Devices

FDA Discusses TOP Reasons for Detention of Goods

posted by Jennifer Diaz March 20, 2013 0 comments

At today’s Import Operations Training, sponsored by the U.S. Food and Drug Administration (FDA) and the Florida Customs Brokers and Forwarders Association (FCBF), top officials from FDA traveled to Miami to educate importers and brokers.  Topics ranged from a general overview of FDA compliance, TOP rationales for FDA detentions, Food Safety and Modernization Act (FSMA) updates, an overview of the newly re-organized (now DIO) Division of Import Operations (formerly DIOP – policy has now been removed), an overview of CBP & FDA’s Joint Team 488 – which handles liquidated damages claims for underlying FDA violations and much more. Highlights of the TOP rationale for detentions follows, as I feel this is of most value to you to know and is arranged by commodity.

Food Products Top Rationales for Detention

  • Manufacturer (processor, packer or person holding food product) is not registered with the FDA pursuant to the Bioterrorism Act.  (You can Register with the FDA here: www.FDA-USA.com)
  • Low Acid Canned Foods (LACF) are imported without establishment registration (FCE #) or scheduled process (SID #)
  • The products are subject to an Import Alert
  • Product labeling is not compliant (FDA does not pre-approve food labeling, it is up to importers to assure it is compliant before importing)
  • Common labeling violations include:
  1. Label is not in English
  2. Incorrect or missing statement of identity
  3. Failure to list allergens
  4. Failure to declare ingredients
  5. Failure to include a proper “Nutrition Facts” label (incorrect formats for Nutrition Facts labeling is also common) required by 21 C.F.R. 101.9
  6. Color additives are not declared correctly (or at all) on the label or not certified
  7. Food  additives are unsafe or not declared on the label

Dietary Supplements Top Rationales for Detention

  • The products are subject to an Import Alert
  • Product labeling is not compliant (FDA does not pre-approve dietary supplement labeling, it is up to importers to assure it is compliant before importing)
  • Common labeling violations include:
  1.  Label is not in English
  2. Unauthorized health claims
  3. Undeclared active ingredients
  4. Lacks a “Supplement Facts” panel required by 21 C.F.R. 101.36
  5. Failure to list the name of product and “Dietary Supplement” or “Herbal Supplement” on the label
  6. Failure  to list the appropriate disclaimer necessary when claims are made

Cosmetics Top Rationales for Detention

  • The cosmetics are subject to an Import Alert (for example IA 66-38 for cosmetics labeled with drug claims)
  • The cosmetics are contaminated and unsafe to use
  • The cosmetics are manufactured under unsanitary conditions
  • The cosmetics contain a non-permitted color additive
  • Product labeling is not compliant (FDA does not pre-approve cosmetic labeling, it is up to importers to assure it is compliant before importing)
  • Common labeling violations include:
  1.  Label is not in English
  2. Labeling is missing ingredients
  3. Label lacks warnings and adequate directions for use
  4. Missing the net quantity of contents
  5. Cosmetic  contains a “drug” claim

Drugs Top Rationales for Detention

  • The cosmetics are subject to an Import Alert (for example IA 66-41 – Unapproved new drugs)
  • Drugs are not registered or listed with the FDA
  • Product labeling is not compliant (FDA does not pre-approve drug labeling, it is up to importers to assure it is compliant before importing)
  • Common labeling violations include:
  1. Label is not in English
  2. Label does not contain adequate directions for use
  3. Active Pharmaceutical Ingredients (API) is not properly labeled or listed
  4. Drug contains a “new” chemical or a different dosage making the product a “new drug”

Medical Devices Top Rationales for Detention

  • The manufacturers is not registered with the FDA
  • The initial importer is not registered with the FDA
  • The device is not listed with the FDA
  • The product does not contain a 510k or PMA
  • Product labeling is not compliant (FDA does not pre-approve medical device labeling, it is up to importers to assure it is compliant before importing)
  • Common labeling violations include:
  1. Label is not in English
  2. Label is false or misleading 

Bottom line, as you can see, it is up to you, the importer to perform pre-compliance and assure you get compliance right before you import.  FDA expects you to know the requirements and has little mercy if you don’t.  Assure you stay compliant and avoid the top rationale for FDA to detain your goods by hiring someone that is extremely knowledgeable with FDA’s laws and regulations and continually stays up to date with the constant changes. 

Best PracticesCBP

File Your Petitions Timely, Or Else…

posted by Jennifer Diaz March 6, 2013 0 comments

As of January 9, 2013, Customs and Border Protection (CBP) is making procrastinators pay the price for filing untimely petitions that seek relief from liquidated damages. CBP amended it’s guidelines for the cancellation and mitigation of claims for liquidated damages in cases where petitioners are late in filing claims for relief. Additionally, CBP also changed the formula for calculating late petition mitigation.

Current Rule for Timely Petitions

Under the existing regulatory authority, in order to be considered timely, petitions for relief in response to claims for liquidated damages must be filed:

  • A.    By bond principals within 60 days from the date of mailing of the notice of liquidated damages (see 19 C.F.R. 172.3(b)) or any lawful extension thereof; or
  • B.     By sureties within 60 days of the demand for payment by CBP (see 19 C.F.R. 172.4) or any lawful extension thereof.

When circumstances so warrant, extensions of the time period to file a petition may be granted by the FP&F Officer (FPFO) if such an extension of time is requested during the 60-day period available for timely filing a petition (see 19 C.F.R. 172.3(c)). The amendment to the current rule does not allow a petition for relief to be considered if it is filed after (a) the commencement of sanctioning action against the bond principal or (b) the issuance of a notice to show cause against the surety.

A party responsible for a liquidated damages claim may submit an offer in compromise to CBP pursuant to 19 U.S.C. § 1617 and 19 C.F.R. 161.5. These new guidelines, which will be applicable to all liquidated damages claims for which a late petition is filed on or after Jan. 9, are applicable only to petitions for relief and do not apply to offers in compromise submitted pursuant to 19 U.S.C. 1617 and 19 C.F.R. 161.53.

Consequently, the new mitigation guidelines concerning untimely petitions will impose a more stringent standard. Untimely petitions will be accepted or considered only if the petitioner is able to demonstrate the existence of extraordinary circumstances that prevented the petitioner from filing a timely petition or timely seeking a lawful extension of time in which to file a petition. What does that mean? The FPFO will exercise his or her discretion in determining whether circumstances existed so as to warrant CBP’s consideration or acceptance of a late petition.

Untimely Petitions will NO longer be Accepted

Subject to the permitted exceptions, no untimely petition will be accepted in any circumstance if it is filed:

  • a.         More than 180 days after the date of mailing of the notice of claim to the bond principal, or in the case of a surety, the date of mailing of the first demand on surety;
  • b.         After the petitioner has previously submitted a petition in the same case and/or been offered mitigation in the same case, and such mitigation amount was not paid within the prescribed period;
  • c          After the claim has been referred to Office of Chief Counsel for collection action;
  • d.         After the commencement of sanctioning action against the bond principal; or
  • e.         After the issuance of a notice to show cause against a surety.

CBP notes that (a) an untimely petition is not a supplemental petition described in 19 C.F.R. 172.41, (b) a supplemental petition must be timely filed following a decision on an original petition filed in accordance with the established regulatory time frames, (c) the rejection of an untimely petition does not constitute a “decision” for purposes of 19 C.F.R. 172.41, and (d) petitions that are filed untimely and not accepted for consideration will be rejected. A party responsible for a liquidated damages claim may submit an offer in compromise to CBP pursuant to 19 U.S.C. § 1617 and 19 C.F.R. 161.5.

The Exceptions…

However, untimely petitions for relief of liquidated damages claims issued for the late filing of an entry summary, the late payment of estimated duties (including under the periodic monthly statement test), the late payment of passenger processing fees or the late filing or late payment of reconciliation entries may be accepted without regard to the limitations expressed in paragraphs a and b above at any time prior to the circumstances described in paragraphs c through e.

New Mitigation Calculation for Late Petitions

CBP has also implemented a new calculation for mitigating liquidated damages for untimely petitions. In calculating the mitigated amount on a late petition, CBP will first determine the base amount (i.e., the amount of mitigation that would have been afforded on a timely petition). CBP will then determine the “additional mitigation amount” by multiplying the full assessed amount of the claim by 0.1 percent (.001) and then multiply by the number of days the petition is late (i.e., .001 times the number of days late times the full assessed claim amount.) The product will be the additional amount which will be added to the base amount to produce the mitigated amount applied to the untimely filed petition. In no case will the additional mitigated amount to be added to the base amount be less than $400. For example, a $100,000 liquidated damages claim for which a petition is filed 30 days late will be mitigated to the amount provided by the guidelines plus an additional amount calculated by the new formula (30 days late x .001 = .03 x 100,000 = $3,000 added charge.) 

Bottom line, assure you have an expert Customs attorney assisting you to fight for mitigation of Liquidated Damages claims, and file your Petitions TIMELY!

Import

Homeland Security Says U.S. Customs Bonds are Insufficient

posted by Customs & International Trade Law Blog August 13, 2011 0 comments

The Office of Inspector General (OIG) of the U.S. Department of Homeland Security (DHS) issued a report criticizing U.S. Customs and Border Protection (CBP).  In a June 2011 report entitled "Efficacy of Customs and Border Protection’s Bonding Process," DHS concluded that up to $12 billion in single transaction bonds for importers may fail to be collected.   Considering that approximately $2 trillion of goods are imported into the United States each year, and that CBP collects about $32 billion in duties, taxes, and fees, $12 billion is a heck of a lot of money to lose.

Let’s discuss some fundamental customs laws and policies first.  A bond is a contract between a principal (i.e. importer) and a surety (i.e. insurance company), with CBP serving as the beneficiary when an importer fails to pay any duties, taxes, and fees assessed by CBP on the imported merchandise.  The single transaction bond amount for the importer established by CBP is typically 1 to 3 times the total value of the imported merchandise for that particular shipment, plus duties, taxes, and fees.  If the importer does not pay the assessed amounts promptly, a liquidated damages claim is issued by the Fines, Penalties, and Forfeitures (FP&F) Office of CBP against the importer and the surety company.  

Although in theory, this type of insurance policy should pay CBP in full every time, it does not really work that way.  Blame it, in part, on anti-dumping and countervailing duty cases.  The U.S. Government Accountability Office (GAO) estimates that it takes over 3 years in anti-dumping or countervailing duty cases between the initial entry of merchandise subject to an anti-dumping or countervailing duty order, and when the final duty bill is issued to the importer.   Importers that are unwilling or unable to pay, or have already gone out of business, result in a loss of revenue to CBP. 

According to the OIG Report, CBP has written off tens of millions of dollars "because of inaccurate, incomplete, or missing bonds" such as a lack of signatures or inaccurate transaction numbers.   Moreover, it turns out that CBP is not doing a good job of keeping copies of the bonds, but often relies upon the customs brokers to do so.  The OIG Report concluded that "there is a potential for collusion between the broker and the importer."  Well, at least, for once, DHS and CBP don’t blame this problem on those pesky customs lawyers.

So, you ask, what will happen now.  No surprise this time – CBP will certainly re-evaluate its current monetary guidelines, last significantly updated in November 2010, to establishing higher bond limits, especially for food and drug products regulated by the FDA which pose a potential threat to the public health and safety.  Importers should expect to see such letters from CBP’s Revenue Division at the National Finance Center located in Indianapolis, Indiana, and more liquidated damages claims from the FP&F offices around the country.